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IF IOWA JUMPS OFF A CLIFF, DOES THAT MEAN WASHINGTON HAS TO?

February 22, 2008

Anytime one speaks up against corporate welfare giveaways as an "economic development" tool, someone will pipe right up and say "Gee, we'd sure like to stop doing this, but we have to because other states do."

That claim doesn't make sense on its own terms, of course. By definition, favoring the carpetbagger business screws the guy that doesn't get the breaks -- the business that has always been here and doesn't try to extort money from the government. But does everyone "have to do it?"

Maybe not:

OLYMPIA, Wash. -- Major tech companies' campaign for a server-farm tax break appears stalled in Washington's Legislature, just a day after hometown favorite Microsoft Corp. won an incentive package from Iowa lawmakers.
The Washington plan, proposed by Gov. Chris Gregoire, would have given Microsoft, Yahoo Inc. and others a multimillion-dollar tax discount on replacement equipment at server farms - buildings that house huge banks of computers crucial in the growing market for Web-based services.

So maybe other states aren't bribing companies? Why not?

Rep. Bob Hasegawa, D-Seattle, was among the House opponents of tax breaks for companies that "don't seem to be hurting for money."
"I just saw it as a giveaway," particularly since server farms add relatively few permanent employees to the economy, Hasegawa said.

Of course, Washington has one thing going for it Iowa doesn't. Iowa's top corporate income tax rate is 12%. Washington's is exactly 12 percentage points less than that. Maybe that's why Bill Gates lives in Redmond instead of Clive.

Related: THE RACE TO FEED MICROSOFT

Tags: corporate income tax.corporate welfare.economic development.